BILL ANALYSIS Ó
AB 1031
Page 1
GOVERNOR'S VETO
AB
1031 (Thurmond)
As Enrolled September 9, 2015
2/3 vote
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|ASSEMBLY: |79-0 |(May 11, 2015) |SENATE: |33-6 |(September 3, |
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|ASSEMBLY: |79-0 |(September 4, | | | |
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Original Committee Reference: P.E., R., & S.S.
SUMMARY: Specifies that an employer who contracts with the
California Public Employees' Retirement System (CalPERS) for
health care coverage pursuant to the Public Employees' Medical
and Hospital Care Act (PEMHCA) is required to meet its
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obligation to provide any collectively bargained, statutorily
required or vested retiree health care contribution, which may
include reimbursement for Medicare Part B premiums, as
specified.
The Senate amendments are technical and clarifying.
EXISTING LAW:
1)Establishes PEMHCA under the administration of CalPERS.
2)Requires a public agency that elects to participate in PEMHCA
to adopt a resolution and forward it to CalPERS. CalPERS does
not currently collect, nor does it maintain records of
bargaining agreements between the employer and its employees'
exclusive representatives as they relate to health benefits.
3)Provides the following three vesting options for contracting
agencies under PEMHCA:
a) A contracting agency could opt to make the employer
contribution amount equal for both active employees and
annuitants. Under this option, an employee who retires and
meets the definition of annuitant becomes 100% vested and
receives an employer contribution amount equal to what the
active employees receive.
b) A contracting agency that joins PEMHCA on or after
January 1, 1986, has the option to temporarily pay a lesser
employer contribution amount for annuitants than for active
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employees provided the agency increases its contribution
for annuitants each year, over a 20-year period, until it
equals the agency's contributions for active employees.
c) A contracting agency has the option to establish a
pre-set "vesting schedule" which establishes specific
percentages of employer contributions based on an
employee's credited years of service. Under this option,
an employee must have 10 years of CalPERS service, with at
least five of those years performed with the contracting
agency to qualify for a 50% employer contribution toward
annuitant health care, increasing 5% for each year of
service, until the employee is 100% vested at 20 years of
service.
4)Provides for eligible annuitants to receive health care
coverage in any of the CalPERS basic health plans available to
active employees until they are eligible for Medicare,
whereupon they are able to enroll in Medicare and elect one of
the CalPERS coordinated Medicare health plans.
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: Medicare is a federal health insurance program that
covers individuals age 65 and older. Medicare also covers some
individuals under age 65 with Social Security-qualified
disabilities and with End-Stage Renal Disease. The Social
Security Administration (SSA) is the federal agency responsible
for Medicare eligibility determination, enrollment and premiums.
Medicare Part A is hospital insurance that helps pay for
inpatient hospital stays, skilled nursing facilities, hospice
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care and some home health care. Retirees and their dependents
may become eligible for premium-free Part A at age 65 with a
work history of 10 years (40 quarters) with Social
Security/Medicare-covered employment, or through the work
history of a current, former or deceased spouse. Individuals
that entered public employment prior to April 1, 1986, and were
not subject to Social Security, were not initially subject to
the Medicare tax, and are therefore not eligible for Medicare
Part A and B benefits without additional payments.
Medicare Part B is medical insurance that helps pay for
outpatient health care expenses, including doctor visits.
Individuals are responsible for paying the Part B premiums to
the SSA. If an individual is receiving SSA benefits, the
premiums will be deducted from his or her Social Security
benefits.
CalPERS annuitants must have Medicare Part B in order to
participate in a CalPERS Medicare health plan. Existing statute
requires CalPERS to reimburse State of California and California
State University retirees enrolled in a CalPERS Medicare plan
for all or a portion of the Medicare Part B premiums they pay on
behalf of themselves and their spouses. This reimbursement
appears as a credit on the annuitant's benefit warrant.
According to the author, "If a firefighter, or any employee, who
is NOT in Social Security or Medicare and is covered by a
statute or agreement providing an employer paid post-employment
health care contribution, then the employer would directly pay
to the health plan the full premium cost or proportion thereof
as obligated by that statute or agreement.
"However, if a firefighter is Medicare eligible and enrolled in
a Medicare Part A and B plan (as required by PEMHCA), the
Medicare Part B premium must be taken directly out of the
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firefighter's Social Security warrant. Additionally, in cases
where the firefighter is in Medicare only then the retired
firefighter is directly billed for the Part B premium. In these
cases, the firefighter should be reimbursed by the employer for
the amount of the Part B premium, or whatever amount is
consistent with the employer contribution obligation."
"Because some firefighters participate in Medicare and others do
not, a disparity exists in the way that post-employment
healthcare premiums are paid. In instances where a retiree is
promised a post-employment healthcare contribution from his or
her employer that would cover some or all of their Part B
premium, the retiree is entitled to reimbursement for that
obligated amount. However, a problem arises when the employer
fails to provide that reimbursement."
The author concludes, "AB 1031 ensures equal treatment of all
firefighter retirees under the Public Employees' Medical and
Hospital Care Act (PEMHCA) with respect to an employer's
participation in the payment of an annuitant's post-retirement
health care contribution."
In the Fiscal Year 2015-16 state budget, the SSA is proposing
trailer bill language, to prohibit all state officers who are
eligible to receive benefits who are first appointed or elected
on or after January 1, 2016, and to prohibit all employees and
annuitants first hired on or after January 1, 2016, by the state
or a state entity, including, but not limited to the
Legislature, the judicial branch, and the California State
University, from being reimbursed for the cost of Medicare Part
B premiums for themselves or their enrolled family members, as
specified.
GOVERNOR'S VETO MESSAGE:
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This bill creates ambiguity and could be interpreted to expand
retiree health benefits by requiring local governments
contracting with the California Public Employees' Retirement
System to reimburse retirees' Medicare Part B premiums.
These benefits should continue to be collectively bargained at
the local level, not imposed by the state. This is particularly
true, given the massive unfunded liability of state and local
retiree health plans.
Analysis Prepared by:
Karon Green / P.E.,R., & S.S. / (916) 319-3957
FN:
0002498